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Business Ethics

Ethics

Dictionary meaning: “system of morals, rules and conduct”.

The origin of this word is from ETHOS which means character.

Ethics is defined as the ability to distinguish between right and wrong and act accordingly.

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Inventory of Ethical Issues in Business

Employee-Employer Relations

Employer-Employee Relations

Company-Customer Relations

Company-Shareholder Relations

Company-Community/Public Interest

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Why ethics is important in business?

To gain the goodwill of the community.

To increase the lifetime of an organization.

Produce safe and effective products.

Provide excellent service & Maintain customers.

Develop and maintain strong employee relations- Suffer less turnover

- Enjoy better employee morale

Suppliers and other business partners prefer companies that operate in a fair and ethical manner

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Why is business ethics important for a company?

Protects and improves sales, reputation and company image.

Improves faithfulness and engagement of its employees.

Prevents business loss.

Empowers communication channels for interest groups.

Helps to retain license to operate.

Decreases risk.

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Simple ethical test for a business decision

Transparency:Do I mind others knowing what I have decided?

Effect:Who does my decision affect or hurt?

Fairness:Would my decision be considered fair by those affected?

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“When in Rome, do as Romans do”.

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Expert opinion: Prof Varun Arya (A member of IIM-A Governing Society

He said: “In India, you just cannot grow until you compromise”.

There is rampant corruption here and all the shortcuts and unfair means are correct.

Most of the top corporate have set of designed values but hardly any of them walk their talk.

Its not only in India but in world also.

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TEXACO – racial discrimination $176 M

MERCURY FINANCE overstating profit $ 2.2 B

ADM - price fixing $100 M

GENETECH - tying personal loan to business deal

CEO loses job

BANKER’S TRUST - deliberately misled or deceived customers

Damaged image

W.R. GRACE sexual harassment CEO loses job

BAUSCH & LOMB - manipulation of accounting data

earnings fell 54%

Does it pay to be ethical?

A General Framework of the Ethical Decision-Making Process

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION

Individual Characteristics of the Decision Maker that Influence the Ethical Decision-

Making Process

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION

* Achievement motivation * Knowledge* Need for affiliation * Experience* Ego strength * Risk taking* Locus of control

Significant Influences on the Ethical Decision-Making Process

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION

* The organization * Technology* Work * Significant others; customers,* The law peers, immediate supervisor,* Economics top managers, family, friends,* Professionalism other “opinion leaders”

Outcomes that Result from the Ethical Decision-Making Process

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION

* Performance * Feedback* Rewards * Promotions* Satisfaction * Learning

Elements of the Ethical Situation

ETHICAL SITUATION

CHARACTERISTICS OF THE DECISION MAKER

SIGNIFICANT INFLUENCES

OUTCOMESDECISION

* Opportunity* Ethical decision history* Moral intensity of the situation

THE ESSENCE OF ETHICS I(Article by Williams)

Codes of ethics do not necessarily lead to ethical behavior.

The core values we profess are not necessarily those by which we live.

Build ethics into organization policies and practices.

Make sure quality and service and integrity permeate the entire organization.

Develop high expectations of all members of your organization.

THE ESSENCE OF ETHICS II (Article by Williams)

Create an organizational culture that

encourages...…

open and honest communication

continual learning

personal development

respect for people

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Conclusion

In order to win the game, you need to plan. To plan information is imperative. Get it through legal and ethical means. Its fact that to win consistently, you need to play by rules. In life play hard and play fair.

In life and business:Ethical Standards must be Set,Ethical Standards must be Met.

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Thank you!21